Bull Market Anniversary: What’s Changed in 7 Years?

Stocks closed out their fourth week of gains as investors gained confidence from higher oil prices and aggressive moves by the European Central Bank. For the week, the S&P 500 rose 1.11%, the Dow grew 1.21%, and the NASDAQ added 0.67%.[1]
Last week marked the seventh anniversary of the market bottom on March 9, 2009. To put the recent volatility into perspective, let’s take a look at what has changed over the last seven years:

The S&P 500 has grown 199%

From the depths of the bear market, the S&P 500 grew nearly 215% through its mid-May 2015 high, surpassing previous historic highs.[2] Since then, stocks have lost value, pummeled by global economic forces. However, it’s a testament to how resilient markets are that they have lost so little when faced with serious concerns about global growth.
Price return between 3/09/09 and 3/11/16. Past performance is no guarantee of future results. Source: Yahoo Finance. All data as of March 11, 2016.

Economic growth has regained speed

The economy has also made major strides in the last seven years. Taking a look at this chart, we can see that in the first quarter of 2009, the economy contracted by 5.4%, putting it firmly in recession territory. In contrast, the latest data from Q4 2015 shows that the economy grew by 1.0%. Now, we’re not too excited about that level of growth, but we can see that the economy has grown substantially since 2009.

Millions of Americans have returned to work

Over the last seven years, the economy has gained over 11.5 million jobs – far more than the 8.7 million jobs lost in the recession.[3] While much of the growth has been in relatively low-paying industries, the improvement has been broad-based, indicating that many sectors of the economy are hiring.[4]
We can also see that the number of both unemployed and “discouraged” workers has been steadily declining since peaking in mid-2010. This is a broader measure of unemployment because it also captures those who are not looking for jobs because they believe no work is available. As the labor market improved, more Americans gained confidence in their prospects and returned to the labor market.[5]

Americans are driving economic activity by spending

In tandem with the increase in available work, Americans opened their wallets and started spending again, increasing personal spending by 15.9% over the last seven years.[6] Since consumer spending accounts for about 70% of economic activity, it represents a driving force for our economy. Though we don’t have February or March data yet, consumer spending still appears to be on a healthy trajectory.

Our view

With all of the talk of recession and bear markets, it can be easy to lose sight of just how far we’ve come during this rally. We don’t believe that it’s possible to accurately time the beginning or end of any market cycle. Since we can’t predict where markets will go later this year, we can take a look at underlying fundamentals and make prudent adjustments to investment strategies as needed. We’re keeping a close eye on markets and will continue to keep you informed.
The week ahead is packed with data. In addition, investors have two central bank meetings in what the media is calling “bank-a-palooza,” a series of meetings by the ECB, Federal Reserve, and Bank of Japan to decide monetary policy. While the Fed isn’t expected to raise interest rates again next week, officials could provide valuable insight into the timing of future rate hikes. If economic data supports further increases, investors could confront the possibility of multiple rate hikes this year.[7]

HEADLINES:

Weekly jobless claims fall. Oil rallied last week after the International Energy Agency reported that after months of lows, oil may have bottomed out now that producers are working to stabilize prices.[9]

Oil prices drive higher after watchdog report. Oil rallied last week after the International Energy Agency reported that after months of lows, oil may have bottomed out now that producers are working to stabilize prices.[10]

European Central Bank moves aggressively to stoke growth. After months of anticipation, the ECB voted to cut interest rates to zero and unveiled a raft of measures to pull the EU out of the doldrums.[11]

Quote Of The Week

“It takes 20 years to build a reputation and five minutes to ruin it.” – Warren Buffett

Recipe Of The Week

Fruit and Nut Scones

Try different fruit and nut pairings to see which ones you like best!
Serves 6Ingredients:
2 1/2 cups all-purpose flour
4 tsp baking powder
1 tsp salt
1/3 cup sugar
1/2 cup cold butter, cut into pieces
1 cup fresh or dried fruit, chopped
1/2 cup nuts, chopped
1 large egg, beaten
3/4 cup buttermilk, half-and-half, or heavy cream (only use as much as you need to make the dough come together)
1/4 teaspoon vanilla extract
2 tablespoons butter, melted
Non-stick cooking spray or a butter wrapper
Chef’s Tip: Try some of these combinations: apricots with almonds, blueberries with walnuts, or peaches with pecans.
Directions:
Preheat your oven to 400°F. Spray a baking sheet with cooking spray or use a leftover butter wrapper to grease it. Mix the flour, baking powder, salt, and sugar into a large mixing bowl. Use a pastry cutter to cut in the cold butter or pulse the mixture in a food processor until it resembles large crumbs. Don’t allow the butter to melt.
Add the chopped fruits and nuts and mix. Add the beaten egg and half of the buttermilk or cream. Stir the dough until it forms a shaggy mass, adding more buttermilk in small increments as needed until there is little or no flour left at the bottom of the bowl.
On a well-floured surface, pat the dough into a rough circle about two inches thick. Use a biscuit cutter to cut out rounds or use a pizza cutter to cut it into wedges.
Place each scone on the greased baking sheet about two inches apart. Brush them with the melted butter and bake for 20-25 minutes until golden brown. Serve warm or at room temperature.
Recipe adapted from RealSimple.com[12]

Tax Tips

6 Facts About Capital Gains

When you sell a capital asset like an investment or a piece of property, the sale can result in a capital gain or loss. The IRS defines a capital asset as “most property you own for personal use or own as an investment”. Here are six facts you should know about capital gains:
A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
You must include all capital gains in your income and you may be subject to the Net Investment Income Tax if your income is above certain amounts. Consult a qualified tax expert for help.
The IRS allows you to deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
If your capital losses are more than your capital gains in a tax year, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.
Capital gains and losses are treated as either long-term or short-term, depending on how long you held the property. If you held it for one year or less, the gain or loss is short-term and your regular income tax rate applies. Long-term gains are taxed at a lower rate.
For more information about capital gains and losses, contact a qualified tax expert or read Publication 550, “Investment Income and Expenses.”
Tip courtesy of IRS.gov[13]

Golf Tip

Kill the Three-Putt

Few things are more annoying than missing an easy two-stroke putt and being forced to take the extra stroke. If you’re struggling with distance control, here’s a drill to help you dial it in:
On the putting green, take two tees and place one a couple of feet behind the hole on the higher side and another one a few inches in front of the hole. They should form a triangle with the hole itself. Now, take a bucket of balls and practice placing your putts inside that triangle from 20, 30, and 40 feet away. Don’t focus so much on getting the ball in the hole; rather, work on getting it within the triangle. Keep working until you can roll the majority of your putts into the zone.
Tip courtesy of Susie Corona, LPGA, | Golf Tips Mag[14]

Healthy Lifestyle

Try Pain-Fighting Superfoods

Research shows that some foods can help ease aches and pains about as well as over-the-counter pain medications. Though you should always consult with a physician before starting any new medical regimen, try adding the foods below to your diet when dealing with pain:
Red grapes contain resveratrol, a chemical that helps prevent tissue degeneration.
Ginger root isn’t just a digestive aid or anti-nausea panacea; it can also help reduce the body’s inflammatory response.
Soy protein can help cut osteoarthritis pain (by 30% or more in one study).
Tip courtesy of AARP[15]

Green Living

Shut Off Your Computer to Save Energy

You could save close to $100 per year by shutting down your home computer each night or when you don’t expect to use it for more than two hours. Turning off the monitor or setting it to sleep mode will also help curb the amount of energy it uses. If you’re in the market for a new computer, consider getting a laptop – it uses a quarter of the power of a desktop.
Tip courtesy of Seattle PI[16]